Advertisement

Empirical Economics

, Volume 57, Issue 5, pp 1751–1782 | Cite as

An empirical analysis of entry and location decisions by bars and liquor stores

  • Yi Deng
  • Gabriel PiconeEmail author
Article
  • 124 Downloads

Abstract

We analyze the entry and location decisions of bars and liquor stores using a spatial game-theoretical framework. We first estimate a one-industry location game where we model bars and liquor stores separately. We then estimate a two-industry location game where we model bars and liquor stores jointly. The model allows for two contradictory effects: a competition effect and a spillover effect. Estimation results reveal a strong negative competition effect for both bars and liquor stores. However, bars appear to benefit from a substantially positive spillover effect. We also find that bars and liquor stores compete with each other. For example, an additional liquor store in a location decreases the probability of a new bar opening in that location and vice versa.

Keywords

Location games Competition and spillover effects Alcohol establishments 

References

  1. Aguirregabiria V, Mira P (2007) Sequential estimation of dynamic discrete games. Econometrica 75(1):1–53CrossRefGoogle Scholar
  2. Aguirregabiria V, Suzuki J (2016) Empirical games of market entry and spatial competition in retail industries. In: Basker E (ed) Handbook on the economics of retail and distribution, Ch. 9, Edward Elgar Publishing, Cheltenham, UK, pp 201–232Google Scholar
  3. Berry S (1994) Estimating discrete-choice models of product differentiation. Rand J Econ 25:242–262CrossRefGoogle Scholar
  4. Berry S, Levinsohn J, Pakes A (1995) Automobile prices in market equilibrium. Econometrica 63:841–890CrossRefGoogle Scholar
  5. Britt H, Carlin B, Toomey T, Wagenaar A (2005) Neighborhood level spatial analysis of the relationship between alcohol outlet density and criminal violence. Environ Ecol Stat 12(4):411–426CrossRefGoogle Scholar
  6. Caballero RJ, Adam BJ (1993) How high are the giants’ shoulders: an empirical assessment of knowledge spillovers and creative destruction in a model of economic growth. NBER Macroecon Ann 8:15–74CrossRefGoogle Scholar
  7. Campbell CA, Hahn RA, Elder R, Brewer R, Chattopadhyay S, Fielding J, Naimi TS, Toomey T, Briana Lawrence B, Middleton JC, Task Force on Community Preventive Services (2009) The effectiveness of limiting alcohol outlet density as a means of reducing excessive alcohol consumption and alcohol-related harms. Am J Prev Med 37(6):566–569Google Scholar
  8. D’Aspremont C, Gabszewicz JJ, Jacques-Francois T (1979) On Hotelling’s stability in competition. Econometrica 47(5):1145–1150CrossRefGoogle Scholar
  9. Datta S, Sudhir K (2013) Does reducing spatial differenciation increases product differentiation. Quant Market Econ 11(1):83–116CrossRefGoogle Scholar
  10. Deng Y (2008) The value of knowledge spillovers in the U.S. semiconductor industry. Int J Ind Organ 26(4):1044–1058CrossRefGoogle Scholar
  11. Duranton G, Overman HG (2008) Exploring the detailed location patterns Of U.K. manufacturing industries using microgeographic data. J Reg Sci 48(1):213–243CrossRefGoogle Scholar
  12. Eaton C, Lipsey R (1989) Product differentiation. In: Schmalensee R, Willig R (eds) Handbook of industrial organization, Ch. 12, vol 1. Elsevier, Amsterdam, pp 723–768CrossRefGoogle Scholar
  13. Ellison G, Glaeser E (1997) Geographic concentration in U.S. manufacturing industries: a dartboard approach. J Polit Econ 105(5):889–927CrossRefGoogle Scholar
  14. Freedman ML, Kosova R (2012) Agglomeration, product heterogeneity and firm entry. J Econ Geogr 12(2012):601–626CrossRefGoogle Scholar
  15. Fisher JH, Harrington JE (1996) Product variety and firm agglomeration. Rand J Econ 27(2):281–309CrossRefGoogle Scholar
  16. Gyimah-Brempong K (2001) Alcohol availability and crime, evidence from Census Tract data. South Econ J 68:2–21CrossRefGoogle Scholar
  17. Hall BH, Adam BJ, Manuel T (2005) Market Value and Patent Citations. Rand J Econ 36(1):16–38Google Scholar
  18. Hotelling H (1929) Stability in competition. Econ J 39(153):41–57CrossRefGoogle Scholar
  19. Irmen A, Thisse J-F (1998) Competition in multi-characteristics spaces: Hotelling was almost right. J Econ Theory 78:76–102CrossRefGoogle Scholar
  20. Igami M, Yang N (2014) Cannibalization and preemptive entry in heterogeneous markets. Working paper, Yale School of ManagementGoogle Scholar
  21. Jaffe A, Manuel T (1996) Flows of knowledge from universities and federal labs: modeling the flow of patent citations over time and across institutional and geographic boundaries. Proc Natl Acad Sci 93:12671–12677CrossRefGoogle Scholar
  22. Jia P (2008) What happens when Wal-Mart comes to town: an empirical analysis of the discount retailing industry. Econometrica 76(6):1263–1316CrossRefGoogle Scholar
  23. Netz JS, Taylor BA (2000) Maximum or minimum differentiations? location patterns of retail outlets. Rev Econ Stat 84(1):162–175CrossRefGoogle Scholar
  24. Picone GA, Ridley DB, Zandbergen PA (2009) Distance decreases with differentiation: strategic clustering by retailers. Int J Ind Organ 27:463–473CrossRefGoogle Scholar
  25. Picone G, MacDougald J, Sloan F, Platt A, Kertez S (2010) The effects of residential proximity to bars on alcohol consumption. Int J Health Care Financ Econ 10:347–367CrossRefGoogle Scholar
  26. Pinkse J, Slade ME (1998) Contracting in space: an application of spatial statistics to discrete-choice models. J Econom 85(1):125–154CrossRefGoogle Scholar
  27. Seim K (2006) An empirical model of firm entry with endogenous product-type choices. Rand J Econ 37(3):619–640CrossRefGoogle Scholar
  28. Seim K, Waldfogel J (2013) Public monopoly and economic efficiency: evidence from the Pennsylvania Liquor Control Board’s entry decisions. Am Econ Rev 103(2):831–62CrossRefGoogle Scholar
  29. Sweeting A (2009) Timming incentives of commercial radio stations: an empirical analysis using multiple equilibria. Rand J Econ 40(4):710–742CrossRefGoogle Scholar
  30. Stavins J (1995) Model entry and exit in a differentiated-product industry: the personal computer market. Rev Econ Stat 77(1995):574–581Google Scholar
  31. Treno A, Johnson FW, Remer LG, Gruenewald PJ (2007) The impact of outlet densities on alcohol-related crashes: a spatial panel approach. Accid Anal Prev 39(5):894–901CrossRefGoogle Scholar
  32. Zhu T, Singh V (2009) Spatial competition with endogenous location choices: an application to discount retailing. Quant Mark Econ 7(1):1–35CrossRefGoogle Scholar
  33. Yang N (2012) Burger King and McDonald’s: Where’s the Spillover? Int J Econ Bus 19(2):255–281CrossRefGoogle Scholar
  34. Yang N (2015) March of the chains: Herding in restaurant locations. Working paper, McGill UniversityGoogle Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Federal Trade CommissionWashingtonUSA
  2. 2.Department of EconomicsUniversity of South FloridaTampaUSA

Personalised recommendations